September 05, 2014

International Trade

Metallurgic exports retained at ports

Authorities have retained metallurgic products for export at Venezuelan ports due to a recent ban on exporting iron, steel and aluminum products. They promised to specify the products that cannot be traded, but have not yet divulged the list and are holding back all iron and aluminum byproducts. More in Spanish: (El Nacional; http://www.el-nacional.com/)

Logistics & Transport

ALITALIA restarts Venezuela flights after hiatus due to FOREX dispute

Italian airline ALITALIA has started to fly to Venezuela again after a near two-month halt when carriers trimmed operations following government delays in releasing ticket revenue under the country's strict currency controls. ALITALIA did not provide reasons for suspending or resuming service. The International Air Transport Association (IATA), which represents around 240 global airlines, said in July that while Venezuela had permitted repatriation of US$ 424 million shared among some airlines, US$ 4.1 billion of airline ticket sales remained trapped in the country. (Reuters, http://www.reuters.com/article/2014/09/02/us-venezuela-airlines-alitalia-idUSKBN0GX2EB20140902)

Oil & Energy

PDVSA chances of lifting output seen boosted by reshuffle

The removal of President Nicolas Maduro’s main policy maker improves Venezuela’s chances of tapping more of the world’s largest crude reserves, according to Barclays. While Rafael Ramirez’s exit from the posts of vice president for economy and energy minister dims hopes for economic reform, it may give his successor at Petroleos de Venezuela SA the opportunity to focus more on the job of pumping oil. Besides running PDVSA, Ramirez oversaw the exchange system and housing programs among other non-oil duties. “The appointment of Del Pino to PDVSA is marginally positive,” according to Barclays analysts Alejandro Arreaza, Alejandro Grisanti and Donato Guarino: “This increases the chances of increasing production.” (Bloomberg, http://www.bloomberg.com/news/2014-09-03/pdvsa-reshuffle-boosts-chances-of-oil-output-increase-barclays.html; El Universal, http://www.eluniversal.com/economia/140904/new-pdvsa-president-faces-the-challenge-of-lifting-oil-output)

Economy & Finance

Maduro says Venezuela will honor international debt, creates "strategic" unified reserve fund

President Nicolás Maduro says Venezuela "confirms to the world that we will continue to comply, as we have throughout our 15 year revolution, and we have all the procedures ready to honor those international obligations that will come due during the next weeks, we have reviewed and we have the capacity, the strength, and it was thus calculated". He also announced the creation of a single account within Venezuela's Central Bank to unify the nation´s "strategic" reserves - and said it will be opened immediately with US$ 750 million. The unified account will include funds from the National Development Fund (FONDEN), the Chinese Fund and other funds and financing sources in order to strengthen strategic reserves. Analysts believe the move sends a positive signal that the national can face its obligations. HSBC considers this move "should reduce uncertainty over the real amount of disposable assets". (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40920&idc=2; El Universal, http://www.eluniversal.com/economia/140903/venezuelas-international-reserves-in-a-single-account; and more in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/ejecutivo-crear%C3%A1-cuenta-%C3%BAnica-bcv-para-fortalecer-reservas-internacionales; Infolatam; El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/cuenta-unica-en-el-bcv-dara-transparencia-a-los-fo.aspx#ixzz3CLQ4t2Jl)

Analysts expect no changes in FOREX allocations

Tamara Herrera, director of the Síntesis Financiera think tank explains: "I do not believe there are plans to change the FOREX allocation system, it would seem they want to show markets that there are funds available, and if a credible balance is shown risk perception would diminish". Former Central Bank Economic Research Director José Guerra does not believe FONDEN and China Fund money will enter Central Bank reserves in order to boost FOREX allocation for private imports. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140904/analistas-no-esperan-cambio-en-distribucion-de-las-divisas)

Venezuelan bonds tumble as outlook for devaluation dims

Venezuelan bonds tumbled after President Nicolas Maduro removed the main economic policy maker, fueling speculation that a devaluation and cut in fuel subsidies that would bolster reserves will be delayed. The government’s US$ 4 billion of notes due in 2027 sank 0.72 cents to 74.83 cents on the dollar at 12:01 PM in New York, bringing the two days of losses to 3.85 cents, the biggest drop in 10 months. (Bloomberg, http://www.bloomberg.com/news/2014-09-03/venezuela-s-maduro-removes-ramirez-from-economy-vp-pdvsa.html; El Universal, http://www.eluniversal.com/economia/140903/venezuelan-bonds-fall-following-cabinet-reshuffle)

Government establishes Economic Offensive Fund to support private sector

President Nicolas Maduro has announced the creation of a US$ 500 million Special Economic Offensive Fund which will be used to boost the productive capacity of the private sector. He said the funds will be deposited in the economic and social development bank BANDES, for immediate investment in diverse projects, ranging from industrial to tourism, "which are part of the main driving forces of the private sector economy that should be supported." Maduro 3 billion bolivars for financial support to national entrepreneurs who decide to join the new economic offensive, to boost production and supply. (AVN, http://www.avn.info.ve/contenido/govt-created-economic-offensive-fund-support-private-sector)

Politics

Cabinet shakeup

President Nicolas Maduro announced a major restructuring of his Cabinet that will see the man who has run state oil giant PDVSA for more than a decade become Venezuela's top diplomat.  The shakeup is meant to lay the basis for "five revolutions" in the realms of economics, knowledge, social programs, state policy and "territorial socialism," Maduro said. Rafael Ramirez, long-time PDVSA chief, minister of Petroleum and Mining and Vice President for Economic Affairs, is to become Foreign Minister. Economy and Finance Minister General Marcos Torres will assume the Vice-Presidential post. Asdrubal Chavez, cousin of late President Hugo Chavez, will succeed Ramirez at the ministry, while PDVSA head of exploration Eulogio del Pino gets a promotion to company president. Erstwhile Foreign Minister Elias Jaua is now minister of Communes and Social Movements and vice president for Development of Domestic Socialism. Ricardo Melendez will remain as vice president for Planning and Knowledge, Maduro said, while Dante Rivas is leaving the position of trade minister to head a new agency dedicated to cutting red tape. (Fox News Latino: http://latino.foxnews.com/latino/politics/2014/09/03/venezuela-maduro-shakes-up-cabinet/)

Maduro replaces reform minded economic zar

Rafael Ramírez, who oversaw Venezuela's oil industry for more than a decade, was removed from that role in a cabinet shake-up announced by President Nicolás Maduro. Ramírez had served as Maduro's top economic adviser and was scheduled to lead an investor road show this month in New York in search of financing for the cash-strapped government. He was one of the most vocal proponents of economic overhauls such as slashing domestic gasoline subsidies and simplifying a cumbersome foreign-exchange system, two areas where the government has been bleeding money. But a long delay in announcing policy overhauls has led economists and political analysts to question whether Maduro has the political muscle to implement potentially painful measures like those proposed by Ramírez. Instead, they say that the president appears unwilling to break with radicals in his ruling Socialist party who strongly oppose such measures as capitalist reforms that would hurt the poor. "The sidelining of Ramírez to the Foreign Ministry means that the hard-core communist left has won out," said Russ Dallen, partner at brokerage Caracas Capital Markets. (The Wall Street Journal: http://online.wsj.com/articles/venezuelan-president-replaces-oil-minister-rafael-ramirez-1409713741; El Universal, http://www.eluniversal.com/nacional-y-politica/140903/venezuelan-president-maduro-announces-cabinet-reshuffle; http://www.eluniversal.com/economia/140904/cabinet-reshuffle-in-venezuela-maduro-adjourns-economic-measures; AVN, http://www.avn.info.ve/contenido/new-government-structure-makes-state-tool-economic-prosperity; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2350779&CategoryId=10717, http://www.laht.com/article.asp?ArticleId=2350700&CategoryId=10717; Reuters, http://www.reuters.com/article/2014/09/03/venezuela-cabinet-idUSL1N0R404W20140903; http://www.reuters.com/article/2014/09/03/us-venezuela-cabinet-oil-idUSKBN0GY2O320140903; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40903&idc=4; El Universal, http://www.eluniversal.com/economia/140904/analyst-cabinet-shake-up-deprived-ramirez-of-control-over-pdvsa; Fox News, http://www.foxnews.com/world/2014/09/03/venezuela-president-replaces-longtime-oil-chief-as-part-cabinet-shakeup/)

Military controls productive and financial policy

The new Venezuelan cabinet proves the military is in control of productive and financial affairs. General Rodolfo Marco Torres was confirmed as Minister for Economy and Finance and named Vice President for Economic Affairs, replacing Rafael Ramírez. Torres, who is also a director at the Central Bank, will now be in charge of a number of steps such as the "fiscal revolution", exchange policy and the price of gasoline. Military presence was also expanded by naming Air Force Major General Giuseppe Yoffreda as Air and Aquatic Transportation Minister, in charge of negotiating the government's outstanding debt with international airlines. Yoffreda is also President of the Venezuelan Foreign Trade Corporation (CORPOVEX), in charge of government and private sector imports. Lieutenant Colonel Yván Bello has been named Nutrition Minister, in charge of importing and distributing food. Lieutenant José David Cabello was confirmed as Minister for Industries, National Tax Superintendent and is a board member in the Foreign Trade Center (CENCOEX). Army Lieutenant Jesse Chacón remains as Minister for Electric Energy. According the ECOANALÍTICA think tank cabinet changes underscore that "the government is controlled by radicals and the military, and...they get on very well. They like control, planning, and it allows them to keep on enjoying their privileges as a caste", and adds they " will do whatever they can to keep the status quo, even if it means taking half measures as mere stop gaps". The report does not rule out that at some time they may resort to devaluation, increasing controlled prices and renegotiating foreign debt. More in Spanish: (El Universal, http://www.eluniversal.com/economia/140905/militares-controlan-areas-productiva-y-financiera; and El Nacional; http://www.el-nacional.com/)

Business regrets lack of economic policy decisions

Ismael Pérez-Vigil, Executive President of the nation's Industrial Federation (CONINDUSTRIA) says "we had expectations that in addition to changes within the Cabinet, some economic policy guidelines would be outlined...unfortunately it was not what we believe the country needs at this time". FEDECAMARAS President Jorge Roig welcomed changes involving PDVSA and the Ministry of Mining and Oil, but said “what now is needed to learn if whether there is going to be a change in the game scheme which is what all Venezuelans are waiting for.” (El Universal, http://www.eluniversal.com/economia/140904/empresarios-lamentan-falta-de-decisiones-economicas; and Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40923&idc=4)

Opposition leaders reject changes that do not face up to economic crisis

Opposition spokesmen decried the fact that President Maduro has avoided facing up to the nation's economic crisis and concentrated his speech on bureaucratic changes without changing course on the economy. Miranda Governor Henrique Capriles says "a shakeup must take place in order to increase domestic productivity, generate investor confidence and create jobs". He adds it adds up to "the same faces exchanging chairs", and criticized Maduro for claiming success when "the reality is that companies are bankrupt, they have destroyed production and the results are scarcity and long lines". The Democratic Unity Conference (MUD) issued a statement saying: "Maduro wasted a clear opportunity...and instead spoke of a country that merely exists in his imagination, made cosmetic changes" that do not lead to the solving of the main problems affecting Venezuelans and they will merely make the country’s crisis to worsen. (Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=40922&idc=1; El Universal, http://www.eluniversal.com/economia/140904/venezuelan-opposition-castling-moves-fail-to-tackle-economic-crisis; and more in Spanish: El Universal, http://www.eluniversal.com/nacional-y-politica/140904/oposicion-rechaza-reacomodos-que-no-atacan-crisis-economica; http://www.eluniversal.com/nacional-y-politica/140904/advierten-que-avanza-la-radicalizacion-del-modelo; http://www.eluniversal.com/nacional-y-politica/140904/sacudon-sirvio-para-quitarle-a-ramirez-el-control-de-pdvsa. (El Mundo, http://www.elmundo.com.ve/noticias/economia/banca/mud--gobierno-ratifico-modelo-economico-fracasado.aspx#ixzz3CLQdzRig)

Senator  Rubio again calls for US sanctions on the Maduro regime

Republican Senator Marco Rubio has called on Senator Harry Reid, the leader of the Democratic majority in the Senate, to bring the law that seeks sanctions on the Maduro regime to a vote, and claims the Venezuelan government has found ways to influence Congress in order to delay legislation on the matter, particularly through Senator Mary Landrieu (D-La), who is seeking a fourth term in November. More in Spanish: (Diario 2001, http://www.2001.com.ve/en-la-calle/senador-de-eeuu-vuelve-a-presionar-para-imponer-sanciones-al-gobierno-de-maduro.html)

Colombia expelled Venezuelan opposition activist Lorent Saleh

The Colombian government has expelled Lorent Saleh, the head of an NGO called "Operation Freedom", and turned him over to Venezuelan immigration authorities. More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140905/colombia-expulsa-al-opositor-venezolano-lorent-saleh)

Samper expects to discuss "dialogue" with Maduro

Ernesto Samper, newly appointed Secretary General of the Union of South American Nations (UNASUR) says he "hopes to discuss with President Maduro...ways to reactivate the political talks sponsored by the Foreign Ministers of Colombia, Ecuador and Brazil....which is currently frozen, not broken." More in Spanish: (El Universal, http://www.eluniversal.com/nacional-y-politica/140905/samper-espera-hablar-con-maduro-sobre-el-dialogo)

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.